Shifting ground: Nonprofits struggle to navigate changing terrain, forge corporate partnerships

July 11, 2012

FULL ORIGINAL VERSION

BY ADAM PARKER

The Post and Courier

Last month, leaders of the nonprofit sector in the Charleston area gathered at Trident Technical College to hear fundraising guru Jon Duschinsky, founder and CEO of bethechange, a global strategic agency focused on cause-related initiatives.

Duschinsky delivered the keynote address at the Association of Fundraising Professional’s local Summer Institute, and then led a breakaway group in a discussion about how nonprofits and for-profit companies can better work together to affect change that benefits both.

The speaker knew how to capture one’s attention. Provocative statements were followed by direct challenges and demanding questions. A slide show and video clips enhanced the presentation.

Nonprofits alone can never solve all our social problems, he declared, and it’s foolish to think that the relatively slim expenditure on “social good” could ever be enough to make more than a dent.

“Societies decided to subcontract this work to underpaid, undervalued and under-resourced people in the nonprofit world. We’ve played into their hands. We haven’t solved the problems, and we never will.”

Duschinsky went on to explain that the goals are skewed, the expectations wrong, the tactics less than realistic and the conceptual framework for charitable enterprise too narrow.

He described the difference between a movement (“them”) and a campaign (“you”), and insisted that campaigns, no matter how successful, are top-down and therefore inherently limited. What’s needed is a belief-driven movement, achievable outcomes, vocal champions, robust conversation and empowerment.

The heads in the room nodded affirmatively.

Duschinsky’s visit to the Charleston area came at a critical moment for the nonprofit sector, according to many people interviewed by The Post and Courier. Government funding continues a decline not likely to be reversed substantially once the economy begins to grow again, observers said. More of the burden of providing social services is falling on the shoulders of community organizations already stretched thin and ever scrambling to raise money.

Government historically has made multi-year commitments to core funding and projects, noted Andrew Watt, CEO of the Association of Fundraising Professionals, a nationwide trade group. But as those funds dry up, nonprofits increasingly are relying on the most generous individual donors who can write big checks and on corporations they hope can help fill the gap. The three-legged stool has been destabilized, perhaps indefinitely.

But the rapprochement between for-profit and not-for-profit organizations has been tentative.

“While people recognize that that shift is inevitable, we see the public sector withdraw before seeing how we can make up that slack from the corporate sector,” Watt said.

The ground shifts

Meanwhile, expectations of donors are shifting. Individuals want their money spent on programs they care about most, sometimes leaving nonprofits with insufficient cash in their operating accounts, according to Steve Skardon, executive director of the Palmetto Project. Corporate donors often target their philanthropy, focusing on certain social silos such as education or healthcare. Government relies more and more on public-private partnerships. And groups that cater to nonprofits are changing their strategies to require evidence that charities are doing more than simply providing emergency aid.

Trident United Way, for example, recently announced it would distribute nearly $9 million a year for the next three years to various nonprofits and programs, but some, such as the Red Cross, didn’t make the cut because of United Way’s new strategic emphasis on education, income and health, along with its expectation that funding recipients will create “long-lasting change.”

All of this is forcing some nonprofits to choose between long-held missions — transporting the elderly or operating a soup kitchen, for example, neither of which do very much to address root causes of poverty — and funding sources with strings attached, Skardon said.

This, in turn, raises large questions about who provides the social safety net, and whether the nonprofit sector ever can be equipped to do so as government funding of social services declines, he added.

The challenge to nonprofit service providers is made especially acute by the partisan political environment. What remains of critical federal and state funding is often vetoed or rejected in South Carolina on ideological grounds, with little regard for who stands to benefit or lose, according to Skardon, whose group works on healthcare, education, race relations and more.

Unless the S.C. Legislature overrides Gov. Nikki Haley’s vetoes this week, funding for the arts, higher education, public schools, mental health, infrastructure and more will be slashed.

Haley even vetoed funding of more than $450,000 to the S.C. Coalition Against Domestic Violence and Sexual Assault, which helps rape victims, calling the earmark one of several “special add-on lines (that) distract from the (Department of Health and Environmental Control’s) broader mission of protecting South Carolina’s public health.” The loss of that money represents a 37 percent cut to the Coalition’s annual budget.

Last August, Haley and State Superintendent of Education Mick Zais decided to forego $144 million from the federal Education Jobs Fund meant to help school districts get through tight economic times and avoid teacher layoffs.

Federal “Race to the Top” money also is available to South Carolina should it choose to compete for it: A pot of $200 million for classroom expenditures, and another pot of $500 million for preschool programs are earmarked for states that qualify. But Haley and Zais said no, characterizing the opportunity as an unwanted “federal bailout.”

This leaves school districts in a difficult position, and it places extra demands on nonprofits that work with them.

Pay more later

Communities in Schools, which is slated to receive $550,000 from Trident United Way during the next three years, is one of those nonprofits. It works to reduce the dropout rate by providing mentors, counseling and other services inside at-risk schools. Executive Director Jane Riley-Gambrell acknowledged the challenge.

“Any time the pot of resources is smaller, the needs are not going away in the community,” she said. “So the challenge is, how do you continue to meet those needs and provide a resource to that entity when there are less funds?”

Communities in Schools doesn’t get any federal dollars, but when the state’s school districts miss out on such funding, addressing the dropout problem can slip down a notch on the priority list, Riley-Gambrell said.

“In the last 19 years that I’ve been doing this, one of the challenges has been to explain the importance of prevention,” she said. “Pay for it now, because you’re going to pay (even more) for it later.”

Riley-Gambrell is turning to individual and corporate donors to bolster both her budget and her mission. Nonprofits must produce measurable outcomes so they can show donors that they are a worthy investment.

“We are trying to increase our awareness so that we can create new partnerships with businesses, individuals and foundations. … My task needs to be to entice and educate ABC Corporation about the wonderful work of Communities in Schools so that they want to become a partner, to help us financially — but it’s not only about money.” Board service, volunteerism and other in-kind gift giving also is important. “What I’m looking for is a true partnership.”

Good citizens

While nonprofits rush to adjust their messaging and demonstrate their value to donor-partners, for-profit companies also are tweaking their philanthropic methodology, increasingly embracing a “corporate citizenship” model.

Benefitfocus, which employs more than 700, helps local agencies that provide basic needs such as food, clothing and shelter, but also raises money from employees for the United Way, according to Marketing Communications Senior Manager Sally Clarkson. It has directed funds to the Charleston Symphony Orchestra, Special Olympics and March of Dimes Walk. It hosts quarterly blood drives. It also encourages its workers donate their time and talent.

Engaging employees is very important, said Rachel Hutchisson of Blackbaud, who runs the company’s Corporate Citizenship & Philanthropy office and who serves on the board of the Coastal Community Foundation.

Blackbaud is a for-profit company that sells software designed for the nonprofit sector, so its staff is very knowledgeable about how charities and charitable giving works, Hutchisson said. Philanthropy, therefore, is part of the company culture. Not only does Blackbaud invite grant applications, it maintains a fund managed by the Community Foundation geared toward educating disabled and disadvantaged youth; it makes direct gifts; and it empowers employees to select causes they wish to support with 80 annual $500 donations.

This new focus on the employee is part of an emerging trend that benefits all involved, Hutchisson said. When workers are part of the decision-making process, they invest themselves more in philanthropic activities, directing monetary and in-kind gifts to charities they care about; they feel better about their workplace which improves retention; and they become engaged citizens.

Other developments in the nonprofit sector include cause-related marketing, which is jargon for partnerships between nonprofits and for-profits companies that share similar goals, and brand alignment, which refers to long-term cause sponsorship such as Avon’s commitment to breast cancer research, Hutchisson said.

In who’s interest?

During Duschinsky’s Summer Institute breakout session, about 20 nonprofit professionals discussed how partnerships with corporations should be forged. After all, several noted, companies are laser-focused on one main thing: making profits. Charitable giving, therefore, is akin to sacrifice.

But if companies stand to gain customers, retain employees and grow their businesses because of philanthropic initiatives, surely they would welcome the chance to collaborate with a nonprofit, right?

And nonprofits surely could learn a thing or two from corporate practices and branding, no?

Anita Zucker, chairwoman and CEO of InterTech Group, a multi-billion-dollar holding company with more than 100 businesses operating around the world, said self-interest very much guides her giving.

She chooses to support education and health initiatives especially, but also the arts and environmental projects. Her philanthropy, much of which is administered through InterTech and its affiliates, is designed in part to improve communities she relies on.

“If we don’t start fixing from the bottom up, we’re never going to be able to hire the people I want to work in my company,” Zucker said. “I want people to have choices, and if we educate them, they’re going to look for better ways to live.”

InterTech’s foundation administers a grant cycle with quarterly application reviews and disbursements of $25,000. Company values are projected outward, she said. For example, health and wellness is a top priority, so Anita Zucker consistently has made contributions to nutrition, exercise and medical programs.

She is concerned with educational access and equity, and often becomes personally involved in community organizing efforts. Most recently, she’s working with United Way and the Chamber of Commerce on setting up a “Cradle to Career” program modeled after initiatives in Cincinnati, Nashville and elsewhere.

The idea is to get nonprofits and other organizations to engage at different stages of the program, providing their particular expertise and services. Right now, Charleston is a little like a fish tank with various species swimming around haphazardly, Zucker said. “We want everybody swimming in the same direction.”

She expressed frustration with strict political ideologies that reduce options and shift the burden disproportionately to the private sector, which has been forced to do more and more.

“We’re all having to do that, we’re picking up the pieces,” she said.

Filling the gaps

For decades, corporate giving has amounted to approximately 5 percent of total philanthropic dollars distributed in the U.S., and the latest report from Giving USA shows no change. Individuals give by far the most, noted Michael Nilsen, vice president of public affairs at the Association of Fundraising Professionals.

“Corporate support definitely is an important component of philanthropic giving, but it’s relatively small. Individual giving is around 75 percent,” Nilsen said. What’s more, the economic environment is lackluster right now, causing many donors to measure their giving carefully. “This is as bad as it’s probably ever been. It is really tough right now. Giving is flat.”

Philanthropy amounts to about 2 percent of gross domestic product whether the economy is strong or weak, Nilsen said. So as the economy contracts, so does charitable giving.

Corporations, therefore, are making adjustments.

“What I’m hearing is they’re being far more strategic, and therefore they’re being far more selective,” he said. The power now is in the hands of the donors; they are deciding what to fund, how and when. “That’s really turning the traditional philanthropic model on its head.”

Nonprofits must compensate by marketing themselves better, finding a niche in which they might thrive and forging unique alliances, Nilsen said.

One nonprofit that’s found a niche is the Humanities Foundation, a Mount Pleasant-based affordable housing agency that relies on a public-private partnership model.

It funds building projects through the Low-Income Housing Tax Credit Program, which enables banks to “purchase” these credits from the S.C. State Housing Finance and Development Authority and convert them into cash equity used to build housing, explained Tracy Doran, president of the Humanities Foundation.

In so doing, banks fulfill a federal requirement to make investments in low-income parts of the community, and they often end up with related mortgage and loan business. Local contractors get work, and low-income residents get subsidized housing.

The 1986 federal Tax Reform Act set this program in motion, and it’s not likely to be shut down soon, but nonprofits that rely on government largess are getting twitchy, Doran said.

“Everybody’s talking about government funding drying up,” she said. “Everyone’s trying to come up with creative ways to fill the gaps.”

A new era

At the Summer Institute workshop, Jon Duschinsky drew a clear line between the interests of for-profit corporations and charities, arguing that companies are waking up to the idea of the citizenship model.

“The more good you do, the more money you make,” he said. “A good product is not enough anymore. Companies are struggling to establish meaningful relationships today. It used to be about the product, now products are pretty much irrelevant.”

Perhaps he was being deliberately provocative. Surely products are not irrelevant, some in the room retorted. But the point was taken: it’s about meaningful branding, it’s about attaching a message to the product, it’s about nonprofits finding ways to help corporations enhance their brand by making charitable commitments to the communities in which they do business.

It’s about striking a balance between profit and the common good.

Skardon recalled an era when his board consisted mostly of CEOs, whose businesses were tethered to the state. But in the years since, companies have shut down, left the state or expanded their operations and moved the headquarters away.

“CEOs used to consider it their responsibility as citizens dependent on the state to address all problems in meaningful ways,” Skardon said. They thought of themselves as senior corporate statesmen. “Now it’s much more diffuse.”